Wednesday, November 20, 2013

Apple’s Success Formula


Apple is ranked 6th among the Fortune 500 companies. It profits for the year 2012 are $41,733 million, making it second amongst the companies that made the most in 2012. [1]

In the article, “Types of Strategy: Which Fits Your Business?” we learnt about the 4 major strategies that companies can use to become more profitable. These include product differentiation, customer relationship, network effects and low cost leadership strategies. Let’s see the strategies that Apple adopted to become the profit leader it is.

Product Differentiation Strategy:
Apple differentiates its product through quality and continuous innovation. Apple develops superior products and ensures high quality to reduce customer stress involved with exchanging/returning/repairing products. Another way that Apple differentiates its products is through continuous innovation. Apple has never stopped innovating. [4]
Apple is spending aggressively on innovating. It will spend $11 billion on capital expenditures in 2014. They plan to spend this money on improving operations, product-tooling equipment, manufacturing process equipment and information systems hardware, software and enhancements. [5]
To see Apple’s complete innovation history, visit http://www.boston.com/business/technology/gallery/appleinnovations/.
Take a look at Tim Cook talking about building great products in the video below:



Customer Relationship Strategy:
Apple has always laid special emphasis on maintaining customer relationships.  Apart from developing world-class products to minimize customer service interactions, Apple stresses on maintaining customer friendly environments and providing intensive training for customer service employees. Apple has spelled out its service steps in the acronym APPLE. [6]

A: Approach the customers with a warm and personalized welcome
P: Probe customers politely to understand their problem
P: Present your solution to the customers
L: Listen for any issues and try your best to resole them
E: End well with a warm farewell and invite them to return.

Apple has a “Genius Bar” whose staff is called “Geniuses”.  Apple provides Genius Camp Training, develops the employees’ sales and communication skills, trains them to be more emphatic and never to use “The Forbidden Words” such as “Crash”, “overheated” and allows geniuses to give feedback to one another. [7]
Thus, it can be seen that Apple goes a long way to develop and maintain lasting customer relationships.

Network Effects Strategy:
With the removal of Digital Rights Management (DRM) from most platforms, it becomes difficult for a media consumption company like Apple to develop and take advantage of network effects. Apple however, provides software such as Facetime and Messages that can be used to communicate with other Apple users. To further the reach of such software, they are made available on most Apple products such as iPhones, iPod Touches, iPads and Macbooks.

Low Cost Strategy:
Traditionally, Apple has always targeted selling high end products to the niche upscale market. The costs of its products have always been high as compared to its competitors. Apple has launched the 5C, a new line of phones targeted towards the middle-income group. The iPhone 5C when purchased with a contract retails for $99 for the 16GB model and $199 for the 32GB model. [2]
The prices for Macbooks have also been reduced by $100 for the 11 and 13 inch models. [3]
Moreover, students can also avail of the “Back to School” offers by Apple where students get an additional $50 off on Macbooks and a gift card worth $100.

Competitor Threat
Apple has one of the highest customer retention rates. A survey conducted by UBS Investment research found that 89% of current iPhone customers would upgrade to an iPhone. Moreover, over 50% of those surveyed who mentioned that they would switch brands indicated that they would switch to an iPhone. These numbers should raise a concern for Apple’s competitors. [8]

Technology evangelists believe that Apple’s innovative spirit has been negatively impacted after Steve Job. What are your thoughts? How long do you think Apple will continue to stay amongst the top innovators list?

References
[1] "20 Companies That Made the Most." CNNMoney. Cable News Network, n.d. Web. 20 Nov. 2013. <http://money.cnn.com/gallery/news/companies/2013/05/06/500-most-profitable.fortune/2.html>.
[2] "Select an IPhone 5c." IPhone 5c. N.p., n.d. Web. 20 Nov. 2013. <http://store.apple.com/us/buy-iphone/iphone5c>.
[3] Whitney, Lance. "Apple's Winning Strategy: Lower Prices." CNET News. CBS Interactive, 24 Oct. 2011. Web. 18 Nov. 2013. <http://news.cnet.com/8301-13579_3-20124674-37/apples-winning-strategy-lower-prices/>.
[4] Stark, Karl, and Bill Stewart. "3 Strategies to Adopt From Apple BY Karl Stark and Bill Stewart." Inc.com. N.p., 12 Apr. 2012. Web. 19 Nov. 2013. <http://www.inc.com/karl-and-bill/3-strategies-to-adopt-from-apple.html>.
[5] Sparks, Daniel. "Apple Is Strategically Spending in 2014." (AAPL). N.p., 15 Nov. 2013. Web. 20 Nov. 2013. <http://www.fool.com/investing/general/2013/11/15/apples-strategically-spending-in-2014.aspx>.
[6] "Apple's Customer Service Secrets Revealed: A.P.P.L.E." RSS. N.p., 16 June 2011. Web. 20 Nov. 2013. <http://socialmediatoday.com/andyhanselman/551259/apple-s-customer-service-secrets-revealed-apple>.
[7] La, Anh. "Apple IDevices Marketing: Genius Bar - Apple’s Customer Relationship Management." Apple IDevices Marketing: Genius Bar - Apple’s Customer Relationship Management. N.p., 7 Nov. 2012. Web. 20 Nov. 2013. <http://anhla3110.blogspot.com/2012/12/genius-bar-apples-customer-relationship.html>.
[8] Robles, Patricio. "Retention Is Apple's Key to IPhone Success: Report." Econsultancy. N.p., 23 Sept. 2011. Web. 20 Nov. 2013. <http://econsultancy.com/us/blog/8044-retention-is-apple-s-key-to-iphone-success-report>.






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